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Update (Jan. 20): In its report on Iwata's Friday press conference, the Wall Street Journal paraphrased the Nintendo president as saying that smartphones should be used to "make people aware of Nintendo’s games, and encourage them to try out the console version of the games."

“The spread of smart devices does not spell the end of game consoles. It’s not that simple,” Iwata said. “It doesn’t mean that we should put Mario on smartphones."

Original Story

What a difference a failing console makes. Just hours after announcing severely scaled back projections for fiscal year Wii U sales and after projections of yet another fiscal year loss, Nintendo President Satoru Iwata told the audience at an Osaka press conference today that the company might look to smartphones to change up its struggling business.

"We are thinking about a new business structure," Iwata told the press, according to a Bloomberg News report. "Given the expansion of smart devices, we are naturally studying how smart devices can be used to grow the game-player business. It's not as simple as enabling Mario to move on a smartphone."

“We cannot continue a business without winning,” he continued. “We must take a skeptical approach [to] whether we can still simply make game players, offer them in the same way as in the past for 20,000 yen or 30,000 yen, and sell titles for a couple of thousand yen each.”

That's not an ironclad confirmation that Nintendo is looking to develop directly for the phone market, of course, but it's the largest sign yet that the company is strongly considering such a move. Then again, a careful reading could suggest that Nintendo is simply looking at smartphones as companion devices to consoles like the Wii U. Nintendo has recently opened up its Miiverse messaging service to work between the Wii U and mobile platforms, so Iwata's statement could also be hinting at an expansion of that kind of connection.

Still, the suggestion of "enabling Mario to move on a smartphone" suggests there's more behind Iwata's statements than that. That's especially true when paired with mention of a "new business structure," like, say, one where Nintendo focuses on making software rather than continuing to make hardware.

It wouldn't be unprecedented for the company; Nintendo made versions of its arcade hit for consoles from the likes of Atari and Coleco before it had its own consoles, and the company licensed its characters for games on the PC and CD-i into the '90s. Nintendo is far from the grave financial straits that led Sega to abandon the hardware market after the Dreamcast's failure—it took a half-decade of failed systems like the 32X and Saturn to force Sega's hand. Still, Nintendo may be interpreting the writing on the wall and looking to diversify a bit sooner than its former 16-bit competitor did. Or Nintendo may just see smartphone software development as a potential supplement to its existing hardware business, ahead of a Sega-style transition. Or neither of these things. It's all quite speculative at the moment, of course.

Iwata's smartphone talk could also suggest a lack of faith in the future of the 3DS. As that portable system approaches the conclusion of its third year on the market, research analyst Michael Pachter notes that the system is selling "fine" but is still down 50 percent compared to DS levels last decade.

Nintendo is revising its expectations for fiscal year 3DS sales downward as well, from 18 million units to 13.5 million units worldwide. That's not as drastic as the 50 percent reduction in sales expectations for the Wii U, but it's enough to suggest that Nintendo may have been surprised by how much mobile systems are eating into the market for dedicated portable gaming systems—a market that has been a rock-solid cash cow for Nintendo since the days of the original Game Boy.

In the past, we've suggested on these virtual pages that Nintendo would be crazy to slit its own throat by making games for smartphones, but that was 2.5 years and a few major system launches ago. Back in 2012, when the 3DS was struggling in the marketplace more than it is today, I used the popularity of a fake Pokemon app on the iOS app store to suggest that Nintendo might be wise to look at taking a bite of Apple's market. "Why continue to struggle building an audience for your own mobile platform when Apple already has an established device with an audience that's obviously desperate for your software? In other words, why continue to try to beat the IP thieves when you can instead join them?"

Nothing is certain, but it looks like Nintendo may finally be warming to that view.

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Kyle Orland
Kyle is the Senior Gaming Editor at Ars Technica, specializing in video game hardware and software. He has journalism and computer science degrees from University of Maryland. He is based in the Washington, DC area. Emailkyle.orland@arstechnica.com//Twitter@KyleOrl